EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made as of the first day of January, 1999, by and
between JONES APPAREL GROUP, INC. ("JAG"), a Pennsylvania corporation, and
JONES APPAREL GROUP HOLDINGS, INC. ("Jones Holdings"), a Delaware
corporation, and JONES APPAREL GROUP USA, INC. ("Jones USA"), a
Pennsylvania corporation.
W I T N E S S E T H :
JAG is engaged in the manufacture and distribution of wearing
apparel and related items by itself and through and in connection with
subsidiaries ("the Business"). JAG desires to effect a reorganization in
connection with certain subsidiaries in order to focus to their best use
the efforts and resources of JAG and its subsidiaries for the Business.
Jones Holdings is a newly formed Delaware corporation that will
devote its resources to intangible assets and investments in subsidiaries
so that its only activities will be the maintenance and management of
intangible assets and the stock of subsidiaries and the collection and
distribution of the income of such intangible assets and investments. Jones
USA is a newly formed Pennsylvania corporation that will devote its
activities to certain manufacturing, distribution and other operating
activities previously conducted by JAG. Jones Holding and Jones USA have no
previously issued or outstanding capital stock.
The parties desire to transfer assets as provided in this
Agreement to effect a reorganization under Section 351 of the Internal
Revenue Code, so that Jones Holdings will be a wholly-owned subsidiary of
JAG, and Jones USA a wholly-owned subsidiary of Jones Holdings, and the
reorganization provided for herein is referred to in this Agreement as "the
Reorganization." The parties believe that the Reorganization will provide a
management, financial and operating structure that will permit the best use
of resources to take advantage of opportunities for financing, growth and
development of the Business.
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing and of the mutual covenants contained herein, and intending to be
legally bound hereby, agree as follows:
ARTICLE I - REORGANIZATION TRANSFERS; JAG AND JONES USA
1.1 Asset Transfers to Jones USA. Subject to all of the terms and
conditions in this Agreement and solely in exchange for the Jones USA
Shares (hereafter defined), on the Effective Date (hereafter defined), JAG
shall transfer to Jones USA, subject to all liens, encumbrances, security
interests and claims of any kind thereon, all of the assets of JAG retained
or used by JAG in connection with the Business as follows (collectively
"the Transferred Assets"):
A. Cash and Cash Equivalents. Cash and cash equivalents
maintained for or in connection with the Business.
B. Accounts Receivable. Trade accounts receivable and other
accounts receivable, including commissions or other amounts receivable,
however calculated, arising from the sale of goods or provision of
services.
C. Inventory. All inventory of goods held for sale, regardless of
condition and whether or not usable or salable in the ordinary course of
business, including all shipping, packing and maintenance materials and
supplies.
D. Equipment. All equipment, office equipment, furniture,
fixtures, computer hardware and other equipment or fixed assets of any
kind, regardless of condition and whether or not usable, obtained, used or
held for the Business including all manufacturer's warranties or incentives
or other programs to the extent assignable.
E. Prepaid Expenses and Deposits. All prepaid expenses and
deposits relating to the Transferred Assets or the Business, including
prepaid expenses or deposits with suppliers.
F. Contracts. All contracts, orders, real property leases,
equipment and other personal property leases and other written or oral
agreements of any kind relating to the Transferred Assets or the Business
to the extent executory and not completed or fulfilled at the Effective
Date.
G. Intellectual Property. To the extent not previously or
hereafter assigned, transferred or otherwise owned or held by Jones Holding
Corporation (a Delaware corporation), all letters patent, trademarks, trade
names, service marks, designs, copyrights, product names, corporate or
business or
fictitious names, logos or other business identification devices,
confidential information or know-how or similar rights and all other
intellectual property of any kind, including all recordings or
registrations or applications for recordings or registrations of any of the
foregoing and all reissues, continuations or extensions of any recordings
or registrations, and all proceeds and products of any of the foregoing and
all good will in connection with any of the foregoing.
H. Books and Records. All customer lists, supplier lists, books
of account and other books and records in any form, whether written or in
electronic media, together with all computer programs therefor or relating
thereto used or held for use in connection with the Business.
I. Licenses. All government licenses, permits and registrations
and other authorizations and approvals used or maintained in connection
with the Business.
J. Other Assets. All other tangible or intangible assets of any
kind used, maintained or held for use in connection with the Business.
1.2 Assumption of Liabilities. Effective as of the Effective Date, JAG
shall assign and transfer to Jones USA, and Jones USA shall accept and
hereby agrees to assume, discharge, pay or perform as appropriate, all
debts, obligations and liabilities of JAG relating to the Transferred
Assets or the Business (collectively "the Assumed Liabilities"), including
without limitation the following:
A. Notes Payable. All notes, lines of credit and other similar
liabilities payable relating to the Business.
B. Accounts Payable. All accounts payable relating to the
Business.
C. Accrued Liabilities. All accrued liabilities, including
accrued payroll and other tax liabilities.
D. Contractual Obligations. All contractual obligations arising
on or after the Effective Date under contracts transferred by JAG under
Section 1.1G, including commitments under outstanding purchase orders and
commitments.
E. Product Liability and Warranty Obligations. All claims,
obligations and liabilities for product liability, warranty or service
liability or other obligations arising out of or in connection with
products of the Business sold or services performed by JAG.
F. Employee Obligations. All liabilities or obligations to or
with respect to employees of JAG transferred to employment by Jones USA in
accordance with Section 3.3 of this Agreement, under employee benefit plans
or for unpaid vacation or leave time or other benefits or obligations of
any nature accruing or relating to events or periods prior to the Effective
Date.
G. Other Liabilities. All other liabilities or obligations of any
kind or description, of or relating to JAG or the Business, whether
disclosed or undisclosed or known or unknown.
1.3 Transfer of Stock. At Closing (hereafter defined) Jones USA shall
issue to JAG 1,000 shares of Jones USA no par value common stock ("the
Jones USA Shares") which on the Effective Date will constitute all of the
issued and outstanding capital stock of Jones USA, and Jones USA shall at
Closing deliver to JAG a certificate or certificates for all of the Jones
USA Shares.
ARTICLE II - REORGANIZATION TRANSFERS; JAG AND JONES HOLDINGS
2.1 Asset Transfers to Jones Holdings. Subject to the terms of this
Agreement, as of the Effective Date and effective immediately after the
completion of the transfer of assets by JAG to Jones USA under Section 1.1
of this Agreement, and solely in exchange for the Jones Holdings Shares
(hereafter defined) as provided for in Section 2.4, JAG shall transfer to
Jones Holdings, subject to all liens, encumbrances, security interests and
claims of any kind thereon, all of the Jones USA Shares and the capital
stock of the JAG subsidiaries described on Exhibit "A" ("the Transferred
Subsidiaries").
2.2 Assumption of Liabilities. As of the Effective Date, effective
immediately after the Assumption of the Assumed Liabilities by Jones
Holdings under Section 1.3 of this Agreement, JAG shall transfer to Jones
Holdings, and Jones Holdings shall accept and hereby agrees to assume,
discharge, pay and perform as appropriate, all of the liabilities derived
solely from the ownership of the stock of the Transferred Subsidiaries.
2.3 Transfer of Jones USA Stock. At Closing, Jones Holdings shall
issue to JAG 1,000 shares of Jones Holdings no par value common stock ("the
Jones Holdings Shares") which on the Effective Date
will constitute all of the issued and outstanding capital stock of Jones
Holdings, and Jones USA shall at Closing deliver to Jones Holdings a
certificate or certificates for all of the Jones Holdings Shares.
ARTICLE III - CLOSING
3.1 Closing. The Closing of the transactions of the Reorganization
shall take place at such time and place as the parties may mutually agree
and shall be effective as of the beginning of January 1, 1999 ("the
Effective Date").
3.2 Closing Transaction and Documents.
A. At Closing, JAG shall deliver to Jones USA and Jones Holdings
as appropriate such assignments, stock certificates and stock powers, bills
of sale, transfer agreements or other documents or instruments of transfer
as the parties may determine to be reasonably necessary or appropriate to
transfer and evidence the transfer of all assets being transferred under
this Agreement. The instruments of transfer delivered at Closing shall
include such documents and instruments in such form as may reasonably be
acceptable to the transferee; provided that acceptance shall not be
unreasonably withheld.
B. In accordance with Sections 1.3 and 2.3, at Closing, Jones USA
and Jones Holdings shall deliver to JAG certificates for the Jones USA
Shares and for the Jones Holdings Shares, which certificates shall evidence
the issuance of all of the issued and outstanding capital stock of Jones
USA and Jones Holdings, respectively.
3.3 Conditions. The obligations of each party to undertake and
complete the transactions of the Reorganization at Closing are subject to
the following conditions:
A. The representations and warranties of each other party shall
be true, correct and complete in all material respects at the time of
Closing.
B. Each other party shall in all material respects have fulfilled
and performed all covenants and agreements to be performed by it under this
Agreement, and shall have executed and delivered all documents or
instruments to be executed or delivered by it under this Agreement, at
Closing.
C. All consents or waivers required to be obtained for the
transactions of the Reorganization contemplated by this Agreement shall
have been obtained on or before Closing. Nothing in this Agreement is
intended to assign or transfer a contract, right or obligation which
requires for transfer the consent or waiver of another party unless such
consent or waiver is obtained. If any required consent or waiver is not
obtained prior to Closing and the parties determine nonetheless to proceed
with the Closing and the transactions of the Reorganization, the parties
shall cooperate in taking such action and executing and delivering such
documents as may be reasonably necessary or appropriate promptly to obtain
the consent or waiver or to obtain for the appropriate party or parties the
benefits or burdens of the rights or obligations to be transferred,
notwithstanding the absence of the consent or waiver.
3.4. Employees. It is the intention of the parties that, as of the
Effective Date, Jones USA will employ the employees of JAG engaged in the
activities and operations to be conducted after the Effective Date by Jones
USA, and the parties shall take such action and execute and deliver such
documents and instruments as they may consider reasonably necessary or
appropriate to effect such transfer of employees. On or promptly after
Closing, the parties shall take such actions as may be necessary for Jones
USA to adopt, as of the Effective Date, all employee benefit plans or
similar arrangements applicable to the employees to be employed by Jones
USA as of the Effective Date.
3.5 Termination. At any time prior to the Effective Date, the parties
may terminate this Agreement and the obligation to proceed with Closing by
mutual written consent of all parties.
ARTICLE IV - WARRANTIES AND INDEMNIFICATION
4.1 Warranties of JAG. JAG hereby represents and warrants to Jones
Holdings and Jones USA as follows:
A. JAG is a corporation duly organized, validly existing and
subsisting under the laws of the Commonwealth of Pennsylvania and is duly
qualified to do business in all jurisdictions in which the nature of its
activities requires such qualification, except where the failure so to
qualify would not have a material adverse effect on JAG or its business or
affairs.
B. JAG has all requisite power and authority to execute, deliver
and perform this Agreement and the Reorganization and all transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions provided for herein have been duly and
validly authorized by all necessary corporate action by JAG. This Agreement
has been duly executed and delivered by JAG and constitutes the legal,
valid and binding obligation of JAG, enforceable in accordance with its
terms, subject to the effect of bankruptcy, reorganization, fraudulent
conveyance and other similar laws affecting the enforcement of creditors'
rights and remedies generally.
C. The execution, delivery and performance of this Agreement will
not violate, result in the breach of or conflict with in any material
respect any term, condition or provision of (i) any law, ordinance or
governmental rule or regulation currently in effect to which JAG is
subject, (ii) any judgment, order or award or determination of any court,
arbitrator or other adjudicating body applicable to JAG, (iii) the Articles
of Incorporation or By-Laws of JAG, (iv) any license, permit or other
governmental authorization applicable to JAG or its properties or business
or affairs; or (v) any contract, lease, commitment or other written or oral
agreement to which JAG is a party or by which it or its property is bound.
D. Subject to the provisions of Section 3.3C, no authorization,
approval or consent and no registration with any governmental or regulatory
body or authority, which has not been obtained on or prior to the Effective
Date, is necessary for the execution, delivery and performance of this
Agreement by JAG.
E. JAG has conducted its business in substantial compliance with
all federal, state and local laws, ordinances, rules and regulations except
where the failure to comply would not have a material adverse effect on the
Business or Transferred Assets.
F. The financial statements of JAG as of the end of the last
fiscal year ending prior to the Effective Date, previously made available
to all parties, are true, correct and complete in all material respects and
fairly present the financial condition of JAG as of the dates thereof.
There have been no material adverse changes to the financial condition of
JAG since the dates of such statements.
G. No representations or warranties made in this Agreement or in
any agreement, schedule or other document furnished by JAG in connection
herewith contains or will contain any untrue statement of material fact, or
omits or will omit any fact necessary to make the statements contained
therein not misleading.
4.2 Warranties of Jones USA. Jones USA hereby represents and warrants
to JAG and Jones Holdings as follows:
A. Jones USA is a corporation duly organized, validly existing
and subsisting under the laws of the Commonwealth of Pennsylvania and is
duly qualified to do business in all jurisdictions in which the nature of
its activities requires such qualification, except where the failure so to
qualify would not have a material adverse effect on Jones Holdings or its
business or affairs.
B. Jones USA has all requisite power and authority to execute,
deliver and perform this Agreement and the Reorganization and all
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions provided for herein have
been duly and validly authorized by all necessary corporate action by Jones
USA. This Agreement has been duly executed and delivered by Jones USA and
constitutes the legal, valid and binding obligation of Jones USA,
enforceable in accordance with its terms, subject to the effect of
bankruptcy, reorganization, fraudulent conveyance and other similar laws
affecting the enforcement of creditors' rights and remedies generally.
C. The Jones USA Shares when issued to JAG as provided in this
Agreement will be validly issued, fully paid and non-assessable and free
and clear of all liens, pledges, security interests, encumbrances and
adverse claims of any nature and will constitute all of the issued and
outstanding capital stock of Jones USA. There are no outstanding options,
warrants, rights or agreements to purchase or acquire, or obligations
convertible into, capital stock of Jones USA.
D. The execution, delivery and performance of this Agreement will
not violate, result in the breach of or conflict with in any material
respect any term, condition or provision of (i) any law, ordinance or
governmental rule or regulation currently in effect to which Jones USA is
subject, (ii) any judgment, order or award or determination of any court,
arbitrator or other adjudicating body applicable to Jones USA, (iii) the
Articles of Incorporation or By-Laws of Jones USA, (iv) any license, permit
or other
governmental authorization applicable to Jones Holdings or its properties
or business or affairs; or (v) any contract, lease, commitment or other
written or oral agreement to which Jones USA is a party or by which it or
its property is bound.
E. Subject to the provisions of Section 3.3C, no authorization,
approval or consent and no registration with any governmental or regulatory
body or authority, which has not been obtained on or prior to the Effective
Date, is necessary for the execution, delivery and performance of this
Agreement by Jones USA.
F. No representations or warranties made in this Agreement or in
any agreement, schedule or other document furnished by Jones USA in
connection herewith contains or will contain any untrue statement of
material fact, or omits or will omit any fact necessary to make the
statements contained therein not misleading.
4.3 Warranties of Jones Holdings. Jones Holdings hereby represents and
warrants to JAG and Jones Holdings as follows:
A. Jones Holdings is a corporation duly organized, validly
existing in good standing under the laws of the State of Delaware and is
duly qualified to do business in all jurisdictions in which the nature of
its activities requires such qualification, except where the failure so to
qualify would not have a material adverse effect on Jones Holdings or its
business or affairs.
B. Jones Holdings has all requisite power and authority to
execute, deliver and perform this Agreement and the Reorganization and all
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions provided for herein have
been duly and validly authorized by all necessary corporate action by Jones
Holdings. This Agreement has been duly executed and delivered by Jones
Holdings and constitutes the legal, valid and binding obligation of Jones
Holdings, enforceable in accordance with its terms, subject to the effect
of bankruptcy, reorganization, fraudulent conveyance and other similar laws
affecting the enforcement of creditors' rights and remedies generally.
C. The Jones Holdings Shares when issued to Jones Holdings as
provided in this Agreement will be validly issued, fully paid and
non-assessable and free and clear of all liens, pledges,
security interests, encumbrances and adverse claims of any nature and will
constitute all of the issued and outstanding capital stock of Jones
Holdings. There are no outstanding options, warrants, rights or agreements
to purchase or acquire, or obligations convertible into, capital stock of
Jones Holdings.
D. The execution, delivery and performance of this Agreement will
not violate, result in the breach of or conflict with in any material
respect any term, condition or provision of (i) any law, ordinance or
governmental rule or regulation currently in effect to which Jones USA is
subject, (ii) any judgment, order or award or determination of any court,
arbitrator or other adjudicating body applicable to Jones Holdings, (iii)
the Certificate of Incorporation or By-Laws of Jones Holdings, (iv) any
license, permit or other governmental authorization applicable to Jones
Holdings or its properties or business or affairs; or (v) any contract,
lease, commitment or other written or oral agreement to which Jones
Holdings is a party or by which it or its property is bound.
E. Subject to the provisions of Section 3.3C, no authorization,
approval or consent and no registration with any governmental or regulatory
body or authority, which has not been obtained on or prior to the Effective
Date, is necessary for the execution, delivery and performance of this
Agreement by Jones Holdings.
F. No representations or warranties made in this Agreement or in
any agreement, schedule or other document furnished by Jones Holdings in
connection herewith contains or will contain any untrue statement of
material fact, or omits or will omit any fact necessary to make the
statements contained therein not misleading.
4.4 Indemnification.
A. Jones USA agrees to defend, indemnify and hold harmless Jones
Holdings and JAG, and each of them, jointly and severally, from and against
any and all claims, demands, suits and actions, costs and losses of any
kind, including reasonable attorneys' fees, arising out of or in connection
with Assumed Liabilities accepted and assumed by Jones USA under this
Agreement.
B. Jones Holdings hereby agrees to indemnify, defend and hold
harmless JAG and Jones USA, and each of them, jointly and severally, from
and against any and all claims, demands, suits and
actions, costs and losses of any kind, including reasonable attorneys'
fees, arising out of or in connection with Jones Holdings Liabilities
accepted and assumed by Jones Holdings under this Agreement.
C. Each party hereby agrees to indemnify, defend and hold
harmless the other parties, and each of them, jointly and severally, from
and against any and all claims, demands, suits and actions, costs and
losses of any kind, including reasonable attorneys' fees, arising as a
result of the incorrectness in a material respect of the representations
and warranties in this Agreement of the indemnifying party.
ARTICLE V - GENERAL PROVISIONS
5.1 Further Assurances. Each party shall take such action and execute
and deliver such documents as any other party may reasonably request to
effectuate the terms of this Agreement and the transactions contemplated
hereby.
5.2 Applicable Law. Pennsylvania law shall govern the validity,
construction, interpretation and effect of this Agreement, without regard
to principles of choice or conflict of laws.
5.3 Benefit and Assignments. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective successors
and assigns; provided that no party may assign or transfer all or any part
of this Agreement, whether voluntarily, involuntarily, by operation of law
or otherwise, without the prior written consent of all other parties, which
consent may be granted or withheld in any party's unrestricted discretion.
There are no third party beneficiaries to this Agreement, and this
Agreement does not confer any rights or remedies on any party other than
the parties hereto and their permitted successors and assigns.
5.4 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter
hereof. This Agreement may not be amended or modified in any manner except
by a written agreement duly executed by the party to be charged.
5.5 Headings. The article and paragraph headings of this Agreement are
for convenience of reference only and do not form a part of the terms and
conditions of this Agreement or give full notice thereof.
5.6 Notices. All notices required or permitted under this Agreement
shall be in writing and shall be given by regular or registered or
certified mail or by any other reasonable means (including personal
delivery, telefax or reputable express courier) to the party to receive
notice at the following addresses or at such other address as any party
may, by notice, direct:
If to JAG: Jones Apparel Group, Inc.
If to Jones Holdings: Jones Holdings, Inc.
If to Jones USA: Jones USA, Inc.
All notices given by registered or certified mail shall be deemed as given
on the delivery date shown on the return mail receipt. All notices given in
any other manner shall be deemed as given when received.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
JONES APPAREL GROUP, INC.
By: /s/ Wesley R. Card
-------------------------------
Wesley R. Card
Chief Financial Officer
JONES APPAREL GROUP HOLDINGS, INC.
By: /s/ Ira M. Dansky
-------------------------------
Ira M. Dansky
President
JONES APPAREL GROUP USA, INC.
By: /s/ Wesley R. Card
-------------------------------
Wesley R. Card
Chief Financial Officer
EXHIBIT "A"
Transferred Subsidiaries
Jones Apparel Group USA, Inc. a Pennsylvania corporation
Melru Corporation a Pennsylvania corporation
Jones Apparel Group Holdings, Inc. a Delaware corporation
Jones Investment Co., Inc. a Delaware corporation
Sun Apparel, Inc. (formerly SAI Acquisition Corp.) a Delaware Corporation